PA Law Weekly 1998 ……..
Partial Disability and Earning Power under the New Act
Section 306(b) of Act 57
BY Patrick R. Vitullo
One of the more dramatic amendments to the Pennsylvania Workers’ Compensation Act occurred with the passage of Act 57, specifically, Section 306(b). This section controls the determination of partial disability and “earning power” calculations for work-injured employees. While the calculation of the partial disability remains the same (66 2/3% if the wages of the injured employee, as defined in Section 309), the entire concept of “earning power” has been altered. As workers’ compensation practitioners are well aware, prior to June 24, 1996, all partial disability determinations where employees did not voluntarily return to work, were determined by the Pennsylvania Supreme Court requirements set forth in Kachinski v. WCAB (VEPCO), 516 Pa. 240 532 A.2d 374 (1987). In Kachiniski, the Supreme Court required four factors to be established by the employer seeking to modify or suspend claimant’s benefits based on alternative work: (1) proof of medical evidence that the employee’s condition changed; (2) actually available employment within those limitations; (3) the burden then shifts to the claimant’s good faith effort to follow through with the job referrals within the medical clearance; (4) and if the referral fails to result in a job, then the claimant’s benefits continue. Most of the defenses against the employers Kachinski-based modification and suspension petitions were fought at the second and third prongs: actual job availability and claimant’s good faith effort to follow through on the allegedly actually available jobs.
KACHINSKI TEST REDUCED
With the onset of Act 57, the “actual availability” requirement has been eliminated. No longer is it necessary for the employee to be referred to an open job, but rather “earning power” is determined by the work “the employee is capable of performing” and is based on expert opinion evidence which includes job listings with agencies and departments, private job placement agencies and advertisements in the usual employment area. However, Act 57 does not eliminate the responsibility of “actual job availability” in its entirety. With the advent of Act 57, the employer now has new requirements to meet before it can proceed with a labor market-type “earning power” proof in a petition. Firs, Act 57 requires all employers to either offer a claimant a “specific job vacancy” or; if a specific job vacancy does not exist, the employer must prove that such a job vacancy does not exist before it can proceed with the hypothetical “earning power” proof under section 306(b)(2) if the act. The Department of Labor and Industry promulgated new rules and regulations to assist in the general enforcement of Act 57. For all claims for injuries suffered on or after June 24, 1996, if the specific job vacancy exists within the usual employment area with the Commonwealth, with a liable employer, which the employee is capable of performing, the employer is obligated to offer that job to the employee prior to seeking a modification or suspension based on “earning power”. The specific job offer obligation is triggered by the Notice of Ability to Return to Work (LIBC-757) which may be issued after a medical examination where the physician or other health care provider releases the claimant to some type of employment. Act 57 requires the insured to provide “prompt written notice” on the form prescribed by the department with notification to the claimant, of the following:
●The nature of the employee’s physical condition or change of condition;
●That the employee has an obligation to look for available employment;
●That proof of available employment opportunities may jeopardize the employee’s right to receipt of ongoing benefits;
●That the employee has the right to consult with an attorney to obtain evidence to challenge the insurer’s connections. This notification has been referred to as the claimant’s “Miranda Warnings” of earning power. Assuming the employer has sent out a prompt Notice of Ability to Return to Work, then the second element of the employer’s job obligation triggers the requirement to offer a “specific job vacancy” is not available. The bureau’s rules and regulations provide some guidance as to the time limitations and proofs that must be satisfied: (1) the employee was notified of a job vacancy and failed to respond; (2) the specific job vacancy was offered to an employee, which the employee refused; (3) the employer offered a modified job to the employee, which the employee refused; (4) no job vacancy exists within the usual employment area. If there is more than one specific job available, the employer has the right to select which job will be offered to an employee. The employer’s obligation to offer the specific job vacancy is not limited; rather, it shall continue for up to 30 days or until the filing of a petition for modification or suspension, which ever is longer. However, the rules and regulations do not require the employer to hold a job open for a statutory minimum of 30 days. One section, 34 PA. Code Section 123.301€, specifically provides the employer with some leeway with regard to time for holding open a specific job vacancy. The Department of Labor and Industry requires the job vacancy to be held open :consistent with the employer’s usual business practice.” Therefore, if collective bargaining agreements contain provisions which reduce the time period for specific job vacancies to less than 30 days, conceivably, these provisions will supersede the 30-day time limitation in Section 306(b), and arguably allow the employer to eliminate the specific job vacancy or offer it to another employee, whether work-injured or not, if that practice is “consistent with the employer’s usual business practice.” If the employer shows evidence that a specific job vacancy does not exist, then the employee is free to rebut the employer’s evidence by demonstrating facts that may include the following: (1) during the period in which the employer has or had a duty to offer a specific job, the employer is or was actively recruiting for a specific job vacancy that the employee is capable of performing; (2) during the period in which the employer has or had a duty of offer a specific job, the employer posted or announced the existence of a specific job vacancy, that the employee is capable of performing, which the employer intends to fill.
REBUTTAL OF ‘SPECIFIC JOB VACANCY’ REQUIREMENT
An employee can successfully rebut the employer’s allegation that there is no specific job vacancy by showing that the employer advertised for such a job and offered it to a non-work injured employee or another work-injured employee before the particular challenging claimant. If the other work-injured employee or a non-wok injured employee did not have priority over the specific challenging claimant, the claimant may argue a violation of Section 306(b)’s requirement providing a claimant a “specific job remedy,” and thereby thwart an employer’s subsequent attempt at a labor market survey by a certified vocational counselor. However, again, the collective bargaining agreement does have priority in the collective bargaining agreement. Assume the employer is confronted with a new act claimant who has been evaluated by a physician and released to perform light duty employment, the employer has issued a prompt LIBC-757 Notice of Ability to return to Work within 30 days of the examination, and has proceeded to proffer a specific job vacancy of in-house light-duty employment to the claimant. At this juncture, if the claimant refuses the employment, either based on contrary medical limitations or for no particular reason , then the employer can proceed, after a 30-day time period from the offer of specific job vacancy or, if the collective bargaining agreement or the employer’s usual business practice allows a shorter period, to directly prove hypothetical “earning power” under Section 306(b)(2) of the act.
EARNING POWER
It is in Section 306(b)(2) of Act 57 that the employer who has complied with the notification of ability to return to work and offered specific job vacancies or proven that no specific job vacancy exists, can enjoy the most benefit in its attempt to modify or suspend the claimant’s benefits based on “earning power.” Yet, where there was no requirement of expert opinion evidence for the specific job vacancy, there is a specific requirement that an employer who seeks to use Section 306(b)(2) “earning capacity” modification or suspension use “expert opinion evidence” to prove the employee’s capacity to perform a job. The bureau’s Rules and Regulations state that this evidence includes job listings with agencies of the department, private job placement agencies and advertisements in the usual employment area within this commonwealth.” The reference to “usual employment area” is a significant departure from the old act. Prior to Act 57, the employer’s requirement, when showing modification or suspension of benefits through alternate earing capacity for claimant’s that relocated after a work-related injury, was to find employment within the claimant’s geographic area. Oshinkski v. WCAB (Lincoln Bank), ___Pa. Cmwlth.___, 484 A.2d 225 (1985). “Earning power” determinations under Act 57 now allow the employer to consider an employee’s residual productive skill, education, age and work experience, and any other kind of substantial gainful employment “which exists in the usual employment area in which the employee lives with-in the commonwealth.” Arguably, an employer does not have to re-employ a claimant who removes himself or herself from Pennsylvania after a work injury, even if for a bona fide reason, and relocates to another state. All the employer need do is show the claimants capability of any other kind of substantial gainful employment within the “usual employment area” at the place of claimant’s injury. Act 57 also codifies the case law developments and dicta in Kachinski concerning claimant or counsel’s bad faith in sabotaging the vocational interview. Now, the insurer has the statutory entitlement to require an employee to submit to an interview “by an expert approved by the department and selected by the insurer.” This section arguably allows the employer to even petition for the vocational evaluating in the event that the claimant or counsel refuses to allow the employer a live interview to determine “earning power” of the claimant. Consider some of the more subtle nuances in this change of language in Section 306(b)(2) of the act. Arguable, it will be easier for an employer to rely more on the treating physician for the “earning power” labor market survey. This will be particularly true if the employer offered a “specific job vacancy” within physical limitations of the claimant and the claimant refused to return to work. It would certainly be an even stronger case if the employer relies on both the treating physician’s limitations and the evaluating physician, but the fact that the claimant need not be referred to “actually available” employment will quite possibly allow the employer to rely more on the treating physician’s physical capacities. Often times, a treating physician will release a claimant to sedentary or light duty employment, but disprove or fail to approve the jobs when they are proffered through job descriptions that require a physician’s approval Section 306(b) does not require a physician’s approval in writing nor is there any requirement of a “written labor market survey” or “earning capacity evaluation” that need be forwarded to the claimant to re-employ himself or herself either with the employer or in alternate employment. The claimant’s failure to do so gives the employer the opportunity to proceed with the labor market survey to show the claimant’s “earning power” in the labor market. It cannot be emphasized stronger that there is a necessity for the employer to communicate with an LIBC-757 to the claimant, his or her ability to return to work and release by a physician. The failure to do so before proffering the specific job vacancy” or, even worse, before engaging in an earning capacity evaluation would in all likelihood, be fatal to any petition. Because if the potential due process violation if the employer fails to communicate to the claimant that there is a release to return to work, it would appear that the claimant may have an argument for penalties under Section 435 of the act if the employer simply proceeds to file a suspension or modification petition based on the claimant’s refusal of a “specific job vacancy” or based on a “earning capacity” evaluation without notification of ability to return to work. Importantly, it does not appear that Section 306(b)(2), albeit allowing the employer to show only “earning power,” provides an employer the liberty to set forth imaginary positions in the earning capacity evaluation. It would appear that the job market survey mush show “open jobs” regardless of whether the claimant is actually placed or actually applies for any of the positions. Query the scenario if the claimant is actually provided with information and notification of the job market survey and contacts the employer for placement whether there is a requirement to actually place the claimant in any of the positions or schedule of vocational interviews. It would appear to be prudent to have the earning capacity evaluation address not only residual productive skills, medical limitations, education, age and work experience, but also the location of the positions, the physical demands, the rate of pay and the classification of labor (light, medium, heavy duty). There does not appear to be any time limitation in Section 306(b) to address a scenario where the employer proffers a “specific job vacancy” to the claimant, it is refused by the claimant and then the employer proceeds to file a petition for suspension or modification based on the claimant’s refusal of a specific job. It would appear that as in the pre-Act 57 cases, an “earning capacity” evaluation done during litigation would certainly be probative and relevant evidence for WCJ to consider during the litigation of the suspension/modification petition based on the claimant’s refusal of “specific job vacancy.” Further, an in-house vocational witness, usually an employee or representative of the employer, will not be able to testify as to a “earning capacity” evaluation. That individual must, by statute, be a certified and departmentally approved vocational professional. Subchapter C of the Department’s Rules and Regulations, 34 Pa. Code Section 123.02 (Qualifications for Vocational Experts Approved By the Department), lists the qualifications for the certified vocational expert who conducts an earning power assessment interview as follows: (i) Certification by one of the following nationally recognized organizations: (a) The American Board of Vocational Experts (b) a commission on rehabilitation counselor certification; (c) a commission on disability management specialists certification (d) National Board of Certified Counselors; € other nationally recognized professional organizations approved by the Department and; (ii) on year experience in analyzing labor market information and conditions, industrial and occupational trends, primary duties providing actual vocational rehabilitation services, which include the following: (a) job seeking skills, (b) job development, (c) job analysis, (d) career exploration, € placement of individuals with disabilities, (f) vocational testimony assessment. Additionally the certified vocational expert conducting the earning power assessment interview must have certification by a nationally recognized professional organization specified in paragraph (1) under the direct supervision of an individual possessing the criteria in paragraph 1(i). Also, the certified vocational expert must possess a bachelors degree or valid license issued by the Department of States Bureau Professional and Occupational Affairs, as long as the individual is under the direct supervision of an individual possessing the criteria in paragraph 1(i). Alternatively, the certified vocational counselor may have at least 5 years experience primarily in the workers’ compensation field before Aug. 23, 1996 as a vocational evaluator with experience in analyzing labor market information, conditions, industrial and occupational trends, primary duties providing vocational rehabilitation services which can include, but are not limited to:
●job seeking skills
●job development
●job analysis
●career exploration
●placement of individuals with disabilities
●vocational testing and assessment
Additionally, there does not appear to be any language that indicates that the definition of “earning power” is an irrebuttable presumption if the employer follows the strict time limitations, offers a specific job vacancy and then proceeds to an earning capacity evaluation after the 30 days expires. A claimant may still be able to defend an “earnings capacity” modification or suspension petition by proceeding to rebut with his or her own non-job availability evidence or attempt to procure work on his or her own. Obviously, this will create a credibility issue before the WCJ, particularly if the employee’s valid job search comports with the earning capacity evaluation and states the location of the potential employers, physical demands of the positions, dates of job interviews, rates of pay and the results of the job interview, if any. The important focus of the PA Code with regard to the qualification(s) of vocational experts assigned by the department is the requirement of certification of a nationally recognized organization as listed and on year experience in analyzing labor market information and conditions concerning the six criteria of Act 57 “earning capacity” proof. The second, third and fourth factors are read disjunctively and can be used in addition or alternatively to the requirements of certification and the one-year experience analyzing labor market information or can be used alternatively.
HARLE IS CODIFIED IN ACT 57
Section 306(b)(2) also appears to codify the holding in Harle v. WCAB (Telegraph Press, Inc.), 540 Pa. 482, 658 A.2d 766 (1005). In Harle, an employee’s whose earning power is no longer affected by the employee’s work-related injury is no longer entitled to partial disability benefits even though the earnings may not match his or her pre-injury earnings. Where the loss of earnings is caused by an economic downturn rather than the inability to perform the time-of-injury job, partial disability may not be payable. In the first sentence of Section 306(b)(1) of Act 57, disability “partial in character” must be caused by the “compensable injury or disease” or it is not a Section 306(b) partial disability. Therefore, the partial disability or wage loss that is related to factors other than the work injury (employer lay-off, economic situations effecting plant production) cannot be considered as a factor in determining partial disability. The clause is significant insofar as the employer does not have to worry about the extraneous partial that was typically awarded in cases where an employee suffered residual disability and loss of earnings, in part, due to factors that were outside the control of the employer. Now, it appears the statutory intent of the legislature is clearly to only pay the claimant partial disability where there can be proof that the “compensable injury or illness” resulted in a loss of earnings. Interestingly, a recent Commonwealth Court decision appears to support the codification of Harle and also shows that the Kachinski test of “actual job availability” is now officially dead. In Schneider, Inc. V. WCAB (Bey), No. 1739 C.D. 1997 (Doyle, J., 6/26/98), the court grappled with the issue of whether an employer is required to demonstrate job availability for suspension purposes where the claimant was totally disable due to a non-work related injury, but otherwise could return to modified or light-duty work based on partial recovery from his or her work injury. The claimant suffered a back and neck injury in 1987, and then a non-work related head trauma assult and stabbing that resulted in brain damage and paralysis rendering the claimant totally and permanently disable. The employer filed a suspension petition, which the WCJ granted, quoting USX Corp. V,. WCAB (Hems), ____Pa.Cmwlth.____, 647 A.2d 605 (1994) and Carpentertown Coal Co. V. WCAB (Seybert), ____Pa. Cmwlth.__,623 A.2d 955, petition for allowance of appeal denied, 535 Pa. 640, 631 A.2d 1011 (1993). The board reversed and determined that employer was required to produce job availability. The Employer appealed to the Commonwealth Court which affirmed, but not until a lengthy analysis of the job availability issue. The court analyzed USX Corp., Carpentertown Coal Co. and juxtaposed those holdings that essentially said that an employer did not have to demonstrate job availability where a claimant was disabled as a result of a non-work condition, to Sheehan v. WCAB (Supermarkets General). ___Pa. Cmwlth.___, 600 A.2d 633 (1991), petition for allowance of appeal denied, 530 Pa. 663, 609 A.2d 170 (1992). In Sheehan, the claimant was not released to his time-of-injury job due to the work injury when he suffered a subsequent non-work related injury that rendered him totally disabled. The court in Sheehan held that physical limitations related to the non-work related injury were not to be considered when doing job development, but job development is still necessary if there are work-related residuals that prevent claimant from returning to his or her time-of-injury job. More importantly, the court analyzed Act 57’s partial disability requirements and categorically said that an employer is no longer required to show actual job availability to reduce a claimant’s total disability status to partial disability or to reduce a claimant’s partial disability status or benefits. Quoting as authority Sec. 306(a) of Act 57 (total disability) and the amended Sec. 306(b) of Act (partial disability), the court concluded that an employer need only show “expert medical testimony regarding the degree of claimant’s functional impairment, evidence by an impairment rating.” Distinguishing the situation in Schneider, where the claimant still has some residual impairment that prohibited him from returning to his time-of-injury job, the court galvanized the interpretation that Act 57 codified or adopted the holdings in USX Corp,. Carpentertown Coal Co., and Harle that where a claimant is able to return to work without significant medical impairment, the employer does not have to demonstrate job availability.
HEARSAY TESTIMONY: IS MCCRAY DEAD?
Another issue of some consequence is the status of hearsay testimony in the vocational or “earning capacity” setting under Act 57. More specifically, the controlling old act case, McCray v. WCAB (Preschool Dev. Programs, Inc.), 648 A.2d 348 (Pa. Cmwlth. 1994), clearly found conversations between vocational counselors and prospective employers regarding whether a claimant applied for positions inadmissible hearsay and objectionable. However, under Sec. 306(b)(2) “earning power” must be determined “by the work the employee is capable of performing” and is based upon “expert opinion evidence” that includes the following:
●Job listings with agencies of the department;
●private job placement agencies
●advertisements in the usual employment area;
●if claimant does not reside in the Commonwealth, then the usual employment area where claimant lives.
The bureau said in its Statement of Policy interpreting Act 57 that “actual job availability” is now limited to only the “specific job vacancy” requirement of in-house employment or proof of non-in-house employment, an obviously lesser burden than the old act Kachinski requirements for all prospective employment, with or without the original employer. This change in the employer’s burden is compatible with the lesser standards for “earning power” consideration as shown in the federal Social Security Act. The term “substantial gainful employment” in “the usual employment area” and “residual productive skill, age and work experience” are terms of art that are dangerously analogous to “residual functional capacity”, “substantial gainful activity,” and “work existing in the National Economy,” terms used to assess whether a claimant is “disabled” within the meaning of the Social Security Act. Regularly, the vocational experts in the social security system refer to the Dictionary of Occupational Titles as a reference source for their opinions of “residual functional capacity” and the same text is encouraged for vocational counselors under Act 57. Therefore, the bulk of the certified vocational counselor’s testimony is necessarily hearsay statements that would be previously inadmissible under McCray in old act cases, but arguably admissible under Act 57. The argument for admissibility of the entirety of the vocational counselor’s testimony is supported by the Legislature’s allowance of modification or suspension of claimant’s benefits on the basis of hypothetical “earning power” as opposed to “actual job availability.” For example, under the 1972 Amendments, if a claimant was shown to have medical clearance to work in some modified capacity, jobs of “actually available” positions were proffered to him, the burden, per Kachinski and its progeny, then shifted to the claimant to follow through with the job offers for which he or she was notified. If the claimant did attend interviews contact the prospective employers, make a reasonable appearance and present a reasonable demeanor during the interview, then he or she arguably showed “good faith” efforts in the job development, and benefits were not modified or suspended. However, an Act 57 claimant, once an employer proves that there is no “specific job vacancy” at claimant’s place of employment, does not have the defense of “good faith” effort in the hypothetical “earning power” assessment because the employer now does not have to locate “actual jobs” or actually place a claimant in a alternate position. Simply put, once an employer selects a certified vocational counselor in accordance with 34 Pa. Code Sec. 123 202, and the counselor produces evidence from the DOT or other research sources, including local newspaper advertisements, that proves jobs exist in the “usual employment area,” then employer met its burden for modification or suspension. In light of the (Sec 306(b) provides Pennsylvania emplo9yers with several new options with regard to claimants that have “earning power” or are hypothetically capable of work after medical clearance. Unlike the Pre-Act 57 cases, now the employer is mandated to provide claimant with a “specific job vacancy. The employer also does not have to contend with the onerous Kachinski requirements when it attempts to show “earning power” under Sec. 306(b)(2) so long as the employer properly uses a “certified vocational counselor” to conduct the “earning power” assessment. The “earning power” assessment is much more akin to a social security analysis of a claimant’s “residual work capacity” than the old act requirements of “actual job availability,” shifting burdens for good faith effort in job development, and the actual job offer requirement from the prospective employer. Act 57 Claimants receive their vocational “Miranda warnings” once the employer issues an LIBC-757, and from thereon, they are on notice to either acquire a job themselves, submit to the in-house specific job vacancy, or be subjected to a hypothetical “earning capacity” assessment and risk involuntary modification or suspension of benefits. Regardless of the course of action, Pennsylvania employers have an enhanced position with regard to partial disability cases with the new Sec. 306(b) of Act 57.
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